Update: Sending Comments To The FSOC

By Simon JohnsonUpdate: the link for sending comments to the FSOC on the Volcker Rule is in my Bloomberg article last week. Some of you have asked for me to also post it on BaselineScenario – click here or cut and paste this address:
http://www.federalregister.gov/articles/2010/10/06/2010-25320/public-input-for-the-study-regarding-the-implementation-of-the-prohibitions-on-proprietary-trading

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And so it is done (as we detailed here)... and due to be put in place as of April1st 2014 (rather ironically). The 100-plus-pages of rules and regulations prohibit two activities of banking entities: (i) engaging in proprietary trading; and (ii) owning, sponsoring, or having certain relationships with a hedge fund or private equity fund. But the kicker...

Intense lobbying by senior Canadian officials including federal finance minister Jim Flaherty and former Bank of Canada governor Mark Carney has successfully blunted far-reaching implications for the country’s largest banks from the biggest overhaul of financial regulation in the United States since the Great Depression.

If you managed to be late to the Volcker Rule party, you can learn a great deal of what you’d need to know via the revealing contrast between two reasonably detailed accounts, one at Huffington Post by Shahien Nasiripour, the other by Matt Levine at Bloomberg. If you didn’t know better, you’d wonder if they were talking about the same rule.

By Simon Johnson
The Financial Stability Oversight Council has put out a request for comments on the Volcker Rule – if you write to them soon, they may actually listen.
One big issue is whether there will be high frequency monitoring of trades by big banks – potentially enabling regulators to know if the “no proprietary trading” rule is being violated. The default approach is probably to have a hands-off, light touch – pretty much continuing our recent and not-so-distinguished traditions with regard to supervising banks.

In a special conference call this evening Jamie Dimon, CEO of JPMorgan disclosed a "trading loss" of at least $2 billion from a failed hedging strategy.
The strategy "morphed over time" and it was "ineffective, poorly monitored, poorly constructed and all of that," said Dimon.
Last month, Dimon he denied there were any problems, most likely hoping they would go away or he could cover them up. Instead, Dimon went to the confessional.